Definition of Non-Bank Financial Institutions

This time we will discuss the complete Non-Bank Financial Institution or abbreviated (LKBB) regarding its meaning, function, purpose, and its types. Here’s the explanation.


Table of contents :

Definition of Lkbb



Types of Non-Bank Financial Institutions (LKBB)

  1. Perum Pegadaian
  2. Insurance Company
  3. Savings and Loans Cooperative
  4. Pension Fund (Taspen)
  5. Leasing Company
  6. Capital Markets

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Definition of Lkbb

Based on the Decree of the Minister of Finance of the Republic of Indonesia No. KEP-38 / MK / IV / 1972,


Non-bank financial institutions (LKBB), namely all agencies or institutions that carry out activities in financial matters, either directly or indirectly. Raising funds from the public by issuing securities and then channeling them to finance investment companies or channeling them back to the community.



The main functions of Non-Bank Financial Institutions (LKBB) are:


Providing assistance in the form of capital in the form of credit so that people are not trapped in debt which has high interest from loan sharks.

Raising funds from the public by issuing securities and channeling them back in investment financing to companies in need.

Accelerate development in the economic and financial fields.


The purpose of establishing a Non-Bank Financial Institution (LKBB) is to encourage the development of the money market and capital market and to help capitalize companies, especially lower-class entrepreneurs.


Based on these objectives, Non-Bank Financial Institutions (LKBB) are permitted to raise funds from the public by issuing securities


to then be channeled back to the companies as intermediaries in the issuance of the securities and also to guarantee the sale of the securities.


Types of Non-Bank Financial Institutions (LKBB)

Non-Bank Financial Institutions (LKBB)


There are several categories of Non-Bank Financial Institutions (LKBB) in Indonesia, namely Perum Pegadaian,


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Insurance companies, savings and loan cooperatives, pension funds (Taspen), leasing companies (leasing), capital markets, money markets, and so on.


  1. Perum Pegadaian

Perum pawnshop is one of the state-owned enterprises, the activity of which is to distribute credit to the public on the basis of pawning law in order to avoid the practice of borrowing money at unreasonable interest such as loan sharks.


Based on the Decree of the Minister of Finance No. KEP-39 / MK / 6/1/1971 Perum Pegadaian has main tasks, namely:


Fostering the economy, especially to the small people, by channeling credit with the principle of pawning law, such as for fishermen, farmers, small traders and productive small industries, as well as employees or civil servants who have a lower economy and are consumptive in nature.

Taking part in preventing lending and borrowing practices with unreasonable interest, such as illegal pawnshops or other usury practices.

Providing useful credit especially for people who have a small economy.

Participate in building community credit to be better and wider.

  1. Insurance Company

Based on the Indonesian Commercial Code (KUHD) article 246, an insurance company is an agreement in which the insurer binds himself


to the insured party by receiving a premium to compensate him for the loss, damage or loss of profit that is expected to be suffered due to certain events.


  1. Savings and Loans Cooperative

Savings and loan cooperatives are part of the Non-Bank Financial Institution (LKBB) which has a cooperative legal entity.


Savings and loan cooperatives have a principle that is applied, namely kinship and mutual cooperation to help fellow members for the common welfare.


  1. Pension Fund (Taspen)

The pension fund is a non-bank financial institution (LKBB) which has the activity of providing welfare guarantees to the public both for pension purposes and due to accidents.


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  1. Leasing Company

Leasing is a system of rental contracts that are combined with purchases in installments. However, before the installment is paid off, the right of the goods being traded is still the right of the seller.


However, when the lease contract is signed, all facilities and benefits of the goods can be used by the buyer.


  1. Capital Markets

The Capital Market or commonly known as the stock exchange is an institution that is a place for long-term trading of securities.


In general, funds from the capital market are used to finance the construction of long-term projects, such as the construction of new factories.

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